TSLA Market Action: 2018 Investor Roundtable

[Hock1]

Q3 had the inventory overhang from Q2 not going over 200k. So deliveries (58,840 from inital letter 56,065 from Q3 report (this discrepancy is likely the financing delay mentioned)) could be much higher than production (53,239). Q4 deliveries will likely closer track production. However, the 2,775 car difference in reports will also get added in to boost Q4 deliveries.

Edit: plus 8,048 in transit 3s from Q3.

I am much more focused on deliveries that I am production because deliveries = revenue. ( I am not worried about production because I believe in the immense pull-through of the product by educated buyers ). To date, there has been much discussion about a reasonable valuation for Tesla. When a company has no profits and is growing at a very fast rate, there really are no metrics to value that company. However, we have one data point now----Q3 sales and earnings. We are going to get a second data point when Q4 is reported. These two data points allow analysts to start to talk about ramp and growth of earnings. IMO, by the time Q1 is reported there will incontrovertible evidence of the trajectory that T's growth of earnings will take. This is why I am very confident that T will be rightly ( or over-) priced---and it's not going to be $300.

 

[mongo]

I am much more focused on deliveries that I am production because deliveries = revenue. ( I am not worried about production because I believe in the immense pull-through of the product by educated buyers ). To date, there has been much discussion about a reasonable valuation for Tesla. When a company has no profits and is growing at a very fast rate, there really are no metrics to value that company. However, we have one data point now----Q3 sales and earnings. We are going to get a second data point when Q4 is reported. These two data points allow analysts to start to talk about ramp and growth of earnings. IMO, by the time Q1 is reported there will incontrovertible evidence of the trajectory that T's growth of earnings will take. This is why I am very confident that T will be rightly ( or over-) priced---and it's not going to be $300.

Sure, Fact Checking had said 53k production and 56k deliveries, so I thought there might be a disconnect on the categories.
I expect over 56k in deliveries due in part to the delayed recognition of Q3 'off the lot but not paid for' (directly hurt Q3 helps Q4) plus the Q3 overhang, plus 'last chance for 7,500 off, plus MR, plus reduced overhang due to improved shipping efficiency.

 

[tsunamiofhurt]

This is IMO a really unfair characterization of @Troy's methodology: it's very important to note that his production estimates do not rely on the sample rate nearly as much as say the ASP estimates.

To estimate production the main thing that matters is:

• The highest VIN reported,
• the "density" of VIN allocation by Tesla. (Tesla only uses about 80% of all registered VINs).

So even with 1% sampling rate, if the highest VIN reported is 185,000, it means there's 148,000 Model 3's made so far, which is 52,000 more than the 96,000 at the end of Q3.

The 1% sampling rate means there's a statistical uncertainty of about 100-200 VINs only - which is less than 1%.

So this is a pretty robust methodology, if we assume the 80% allocation density of VINs stays constant.

The main uncertainty comes from end of quarter effects: how strong is the push, does Tesla ramp down the factory, etc.

As others have already pointed out, an 80% VIN allocation density is a HUGE assumption. There are much more VIN gaps in today's VIN distribution than there have been in the past. The VINs for vehicles produced in December are all over the place. Last week I saw an 80k and a 188k (registered 6 days prior) fresh out of the factory.

 

[Hock1]

„VW to be the leader“ ... of what and when? More important why?

I did not see a single VW product yet be it in real or a concept or on paper that is anywhere near to compete with a Tesla regardless which one. Actually being German I would welcome that product as the unions just announced 200 k jobs are at risk in Germany to be lost in OEM forever and not to return! That’s the reality and quite down to earth.

VW has a gigantic challenge in front of them and need to reinvent the entire company. This is not done with money and the €40 bn they want to invest do not make the difference. They don’t impress me at all as this is not about investment but about change which you cannot mandate top down from management to the line workers. It does not work like that.

Just for couriousity why do you believe they will be a leader in a new technology they did not bring one compelling product out yet?

With a dropping SP the sentiment here is very changing too. Once again a good signal that the stock price may go up again. Right now I believe it’s just driven by an overly negative Marco sentiment caused by many politicians polarizing but really not by fundamentals. The latter prevail and make the prices on the long run and that’s what counts. Markets are sometimes stupid.

SP may fall further, so what? Numbers will be solid to good to surprise and all will jump in again. Don‘t be fooled and look at facts not fiction.

I scratch my head around the 3 demand discussion here and on twitter and can only say people either have not been in Europe or China yet at all or just talk about US only.

A flat demand for the 3 once deliveries go to overseas is a dream of shorts but detached from reality unless the demand in the US drops dramatically something I don‘t see.

So quite a negative sentiment and I include Troys 2019 predictions in that statements knowing his superior accuracy from the past but we talk 2019 and we talk first 3s delivered to market larger than the US with a car that’s a much better fit than in the US. No VINs for all of 2019 so no model from him and no better prediction that other people around. Again great modeling in the past but you cannot use VINs to calculate what will be produced and delivered in 2019 in 3 continents by looking at VIN count and reports. Happy to learn about the model that can do that. So let’s not get confused about prediction Modells and accurately.

To finish I like the negative sentiment including some shorts and trolls appearing again which is what we need for a good SP developement on Q1.....

Thanks for those insights. I am curious---since you're German you might know, or have an idea: Okay, VW has paid out $33B to owners of the diesels and paid fines. They have over 300,000 cars in numerous lots across the US. (I've seen one in central Massachusetts). What are they going to do with this disaster? The cars are approaching, or maybe have passed, the point of being somehow resurrected and reused. This has to be a tremendous liability for them and a real strain on the Company, especially with having to put massive amounts of money into BEVs. Are they going to be a casualty of the current upheaval in the auto industry? TIA.

 

[tsunamiofhurt]

Just saw this appearing in the Highest VIN thread.
Entry above it had VIN 1020XX built in October.

Highest production VIN in the wild

Highest VIN thread
Now that Tesla has built well over 100,000 Model 3’s, this thread has gone quiet.

Here’s an update. Last Sunday I was on I5 in California and over a period of a few hours saw multiple car transporters full of new Teslas and some with not new (not wrapped) Teslas, probably end-of-year fleet sales. At a rest stop I parked next to a Tesla transporter to do a driver change and looked at a new Model 3 on the bottom level of the transporter.

It’s VIN was 177672.

HG Wells
No this does not mean they made 177672-102000= 75,672 between October and now.

188k at Fremont on Saturday.

 

[SteveG3]

As others have already pointed out, an 80% VIN allocation density is a HUGE assumption. There are much more VIN gaps in today's VIN distribution than there have been in the past. The VINs for vehicles produced in December are all over the place. Last week I saw an 80k and a 188k (registered 6 days prior) fresh out of the factory.

Agree.

If VINs are hatched by color, the issue of the 20% skipping of VINs may have just been due to the paint shop bottleneck that seems to no longer be a bottleneck (fixed during Q4).

What I’m thinking... troubles with the paint shop may have forced a change in production plans. That is, if producing VIN batch A of Red cars took so much longer than planned, instead of going next to VIN batch B of blue cars, they may have realized they could more efficiently go to a new VIN batch X (blue, or otherwise) that was larger or included a better margin mix of configurations due to orders accumulated during the extra time batch A took to make added to earlier orders originally planned for another batch.

Such a change in production scheduling, dropping a VIN batch for a larger and/or more profitable VIN batch, would seem to have far less effort or cost than other moves done to max past quarter numbers (ie, Lemur, tent!, etc).

fwiw, my Model 3 production guess, 66K-71K.

 

[tsunamiofhurt]

Could sampling bias also affect the RWD vs. AWD mix? After all, we're working under the assumption that Troy's data is undersampling more and more due to the hardcore fans already having their cars... but there's another factor at play. There are presumably a lot of hardcore fans that wanted a SR, and then went for a MR. This would have unlocked another group of people reporting, without unlocking LR AWD reporters.

Absolutely. Sampling bias and low sample rate affect all of the forecasts (with the exception of production/deliveries as those are based on an absolute VIN number).

For instance, @Troy said that Tesla "stopped AWD prod on 3 Dec to focus on MR", which is not correct. He has also said that the factory was shut down on a Saturday/Sunday bc no assigned VINs were recorded in the spreadsheet that day. But then you go to the Fremont employee parking lot and its 80% full ...

 

[Off Shore]

I scratch my head around the 3 demand discussion here and on twitter and can only say people either have not been in Europe or China yet at all or just talk about US only.

This and more. Every Tesla in the wild will engender one or more additional sales. Even if the order book for non-SR trims is exhausted, the Thanksgiving and Christmas rides will convert into sales. There's been little discussion here lately about the steady-state demand for the Model 3, but I'd be really surprised if Tesla couldn't sell as many non-SR trim cars as they care to divert from Europe and Asia over the next year.

 

[Beltsbear]

„VW to be the leader“ ... of what and when? More important why?

I did not see a single VW product yet be it in real or a concept or on paper that is anywhere near to compete with a Tesla regardless which one. Actually being German I would welcome that product as the unions just announced 200 k jobs are at risk in Germany to be lost in OEM forever and not to return! That’s the reality and quite down to earth.

Agreed. Vdub would need to execute perfectly for three years for this to happen. Reality.... the ID is worse in the real world then the current specs. The low priced ID will be better then the current Leaf though.

 

[KarenRei]

Random anecdotal datapoint: My brother-in-law was with me on my test drive, and did a drive in the car. The guy at the Tesla store sent him a followup email saying to let him know if he has any questions, or if he'd like a chance to test drive an S. My brother-in-law said that after that test drive in the 3, he'll most *definitely* be taking him up on the S offer. He's an acceleration junkie and is *really* excited to get to drive a P100D (and definitely can afford it).

Recession or not, these things are contageous.

Sometimes people here (and very often in bearish sites) people act like a recession or the expiration of tax credits means that demand ceases or reduces to nearly nothing. But that's hyperbole. The cars remain highly desirable, and even if the subset who can afford them decreases, it's anything but eliminated.

 

[skitown]

Thanks for those insights. I am curious---since you're German you might know, or have an idea: Okay, VW has paid out $33B to owners of the diesels and paid fines. They have over 300,000 cars in numerous lots across the US. (I've seen one in central Massachusetts). What are they going to do with this disaster? The cars are approaching, or maybe have passed, the point of being somehow resurrected and reused. This has to be a tremendous liability for them and a real strain on the Company, especially with having to put massive amounts of money into BEVs. Are they going to be a casualty of the current upheaval in the auto industry? TIA.

Spent time trying to figure out what TIA means. Still don’t know. ASS.

 

[Hock1]

Spent time trying to figure out what TIA means. Still don’t know. ASS.

Thanks In Advance.....

 

[skitown]

Thanks In Advance.....

Thanks. I definitely should have known that one!

 

[EVNow]

Yes I agree VW is going to be the leader (and this is awesome)

This makes little sense.

What does VW have that - say GM or Nissan don't have ? GM already has Bolt and long range Leaf is getting unveiled in a week. So, GM & Nissan already have cars that VW will produce in 2020. In any case, I expect VW ID to be competing directly against Nissan Leaf & GM Bolt, rather than 3. I'd also not discount Hyundai/Kia, who have long range competitive EVs now. My guess is they can get preferential allotment of LG batteries compared to Europeans or others.

In terms of largest volume EV producer - I won't be surprised if some Chinese manufacturer holds that title 5 years from now - with almost entire production sold within China.

 

[Webeevdrivers]

I wonder if there won’t be a little bit of an appetite build up now that the bulk of production will go overseas. Tesla probably has enough stock hanging around to get them through January for the US market but won’t the list start to get longer again? Say a guy like me decides to accelerate the purchase timeline and get an AWD long range with all the goodies in March of this year instead of next year. (We won’t...just speculating...probably...maybe). How readily will the car be available. I don’t think they are even building that configuration now.

Just saying. Availability on this side of the pond may be affected. We are in Canada too, Possibly even worse due to Canadian config???

 

[SOULPEDL]

Lots of great theories on Production, not much about Profits (anything to gleem there?). Here's my take with some gut feel.

Hunch #1 - Margins are higher (20->25%) through efficiencies and recent automation updates - Great news doesn't need to be more cars made, could be fewer errors, less waste, supplier discounting, SC profits, % staffing overtime etc... Cash is the real goal here. Plenty folk want the car, no worries about demand here. Shorter lead-times could be the best indicator we have on efficiencies in absence of real data. Elon promising EOY delivery just 2 weeks prior... Bravo to that!

Hunch #2 - Elon's been quiet... not defending anything, not complaining much about FUD (compared to other times). I've grown to believe this is his MO when he's just about to blow people away. Latest fart, romance, and camp mode features released spells confidence on the software side. Something about to burst here which brings me to my next hunch.

Hunch #3 - Version 2018.50 is now being tested in Nevada. Not 2018.49.12.2. If Elon is anything like myself, we like even numbers (order in chaos brings comfort, I call it the evens). I believe this is the Summons update long awaited. We haven't heard much core stuff from Software lately other than Summons (was due 12/14) and that note about red lights, stop signs, and roundabouts being tested. So, my guess, Summons for new years, the rest for FSD customers right before earnings to help trigger stock explosion.

I still don't know if I'm going to buy more TSLA this week, but I'll be regretting not doing so if it goes up as usual. Last purchase was $335, then $317 - buying on the drops always makes sense if you believe in the company and saved some. Buy harder the lower it goes. Current prices is very tempting.

Thanks to all of you for the theories and facts, they help support my gut feel.

Merry Christmas!

 

[Skryll]

Absolutely. Sampling bias and low sample rate affect all of the forecasts (with the exception of production/deliveries as those are based on an absolute VIN number).

For instance, @Troy said that Tesla "stopped AWD prod on 3 Dec to focus on MR", which is not correct. He has also said that the factory was shut down on a Saturday/Sunday bc no assigned VINs were recorded in the spreadsheet that day. But then you go to the Fremont employee parking lot and its 80% full ...

Troy aka Teslike also claimed the Model 3 would have 340+ mile range based on some data from EPA testing and higher than previous margin of safety on the range estimate. I wouldn't worry too much about what he says.

 

[EVNow]

Exactly. Assuming 80% with high confidence is like assuming voter turnout in 2016 would be like previous elections. Then you end up like Nate Silver

Bad take - and quite wrong.

Infact Nate Silver was the best of poll aggregators and (rightly) gave Trump a 1/3 chance of winning. Nate doesn't assume any turnout models - that's what pollsters do. BTW, national polls were more accurate in 2016 compared to 2012 - just that they overestimated Hillary vote in 2016 and underestimated Obama vote in 2012.

 

[mongo]

@SOULPEDL agreed and even if GM was lower on $ basis due to lower sales price, increased production volume means lower fixed manufacturing cost per car. Once all operational cost are covered, rest of GM is net profit so any additional cars sold mean more earnings.

 

[KarenRei]

Troy aka Teslike also claimed the Model 3 would have 340+ mile range based on some data from EPA testing and higher than previous margin of safety on the range estimate. I wouldn't worry too much about what he says.

Tested combined cycle EPA range (not hwy) for LR RWD aero is 334mi. Which is quite reasonable. You won't get that on the highway, or in other configs, but that's not the claim. Combined cycle range != highway range.